Planning for Unplanned Income

Everyone receives unscheduled and unplanned income from time to time.  Sometimes it’s a few dollars and other times it’s more – but regardless of the actual amount, unplanned money is almost always absorbed into your finances and gone before you even realized you had it!

Having a plan for unplanned money is the best way to avoid wasting the unexpected income.  You can have a plan even when you don’t know when or how much money you may receive through rebates, tax refunds, gifts or other sources.

Expecting the Unexpected

Even though you can’t write “unplanned income” amounts on your calendar, you can expect that you’ll receive various sources of unexpected income throughout the course of each year.  Decide before you receive it how you will use this money.  For example, are you working on paying down debt?  Decide to contribute 75% of all unexpected income sources to your debt repayment plan, and the remaining can be bonus money for a little entertainment.  Are you almost debt free?  Dream of owning a home or new car someday?  Allocate a percentage of all unexpected income to a special savings account that is meant to realize whatever dream you have.

In some cases, you may want to divide all unexpected income into more than two categories.  This can be done, but gets tricky when the amounts are small.  If you decide to allocate your unplanned money into three or four categories, you’ll need to be faithful that you’ll do it even when you only get an extra few dollars, although it may seem silly to deposit 40 cents into three different accounts when you find yourself with $1.20 extra!  Doing this over the long term will pay off though, and as silly as you may feel, it’s worth it in the end when you’ve gotten enough money for each of the spending categories you’re saving in.  Keep in mind you’ll still want to contribute to these categories to fund it faster- but using your unexpected income to help increase your savings will make it all add up more quickly.

Keeping Track of Unplanned Income

Once you’ve decided where your unplanned income will go, and how much of it will be applied to your designated categories, you might also want to keep a spreadsheet or notepad showing how much unexpected income you receive each year.  It will help you see how much money you were wasting before you put this plan into place, and help you stay motivated to keep handling your unexpected income through your new plan.